Afterpay sucks student into $3110 debt
A tTEENAGE student was weighed down by debt owing more $3110 to the rapidly expanding "buy now, pay later" service Afterpay.
Renny O'Dwyer, 19, earns just $300 a week from Centrelink and a part-time job, but said this didn't stop the purchase lending platform gifting her money she couldn't afford to pay back.
"When I shop, it's quite an addictive thing - you get adrenaline when you purchase things," she told the ABC's PM program.
"I would more often than not just keep using it, and for things that I wouldn't necessarily buy," Ms O'Dwyer said.
Afterpay and similar financial credit services such as Zip Pay have caught the ire of a senate inquiry investigating the industry's targeting of vulnerable customers.
Ms O'Dwyer said the lure of buy now, pay later companies was particularly dangerous to those yet to mature their financial literacy.
The environmental biology student from Perth said half her weekly income was soon being eaten up by repayments to Afterpay, which has grown expediently to became a market leader worth nearly $4 billion on the share market.
"You know, you're just out of high school, you're a uni student, you don't have a full-time job - you've never had that kind of experience where there's expenses to life," she told the ABC.
The Senate inquiry was egged on by a recent ASIC report which found one-in-six customers who use the payment method are in financial trouble and more than half were aged between 18 and 32.
Afterpay co-founder and chief executive Nick Molnar told the second hearing held in Brisbane on Tuesday the company only offers small payments.
"Afterpay is not in the business of offering a $20,000, or even a $5000 loan," he said.
"We're not a line of credit, payments are attached to a discrete product or service, which means we can never be used for a gambling-type service."
Mr Molnar told the hearing customers are unable to keep using the service if they have outstanding payments owing, saying the lending amounts of credit cards are far higher by comparison.
The average outstanding credit card debt is $4200 while the average amount owing Afterpay was $208, he said.
Afterpay co-founder and chairman Anthony Eisen told the hearing the company uses stringent checks to monitor who uses the product.
"Checks revolve around three core areas," he said. "One is identity and fraud, the other is merchant risk and product risk, and thirdly it's around repayment capability."
The executives also said they were "absolutely distressed" by a retailer's advertising campaign that encouraged "broke" consumers to use their service.
The ad encouraged "Broke AF" consumers to use Afterpay to "treat themselves",
Mr Eisen said the company had beefed up monitoring to ensure retailers complied with its efforts to ensure struggling consumers do not take on more debt.
He said the ad was unacceptable and contrary to the values of a company that derives 80 per cent of its income from retailers rather than consumers.
"We were absolutely distressed when we (were) first made aware of that campaign," Mr Eisen said on Tuesday.
"There is nothing whatsoever associated with that campaign that was supported, endorsed or acquiesced (to) by Afterpay in any way."
- With AAP